Appealing mortgage conditions and concerning interest rates paint a nuanced picture of the property market for buyers
Is it a good time to buy a house? If you’re considering buying your first home, you're not alone. Samuel Seeff, founder of Seeff, has some advice that might just make your decision a bit easier: if you wait for interest rates to fall, you're likely to run into more competition and higher prices later on. So, if you're on the fence, it might be worth considering making your move now.
With interest rates being a bit of a wildcard this year, as pointed out by the South Africa Reserve Bank Governor Lesetja Kganyago, it's tough to predict when or if they'll drop.
Interest Rates and the Current State of the Property Market
The good news is that banks are showing a strong inclination to support new entrants into the housing market, with financing options that include 100% of the purchase price and, in some cases, up to 105% to cover additional transaction costs.
Despite a slight increase in interest rates from the record low of 7% in mid-2020, the appetite among first-time buyers has remained strong, only slightly dipping from over 50% to just over 48% of all mortgage applications.
Forecasts suggest interest rate cuts between 0.75% and 1.0% later this year, with Standard Bank predicting four 25 basis point reductions from mid-year, which could lower the prime rate to 10.75% from 11.75%. This scenario presents a strong argument for prospective first-time buyers to consider making their move into the market sooner rather than later.
Is It a Good Time to Buy a House?
Despite higher interest rates, the market conditions presently favour buyers, thanks to the muted price growth over the last few years. This means that prices are at a historic low, offering an opportune moment to buy properties at rates similar to those from two to three years ago.
Ooba reports a significant escalation in the average purchase price among first-time buyers. From R750,000 a decade ago to R900,000 before the COVID-19 pandemic and now around R1.123 million, it's evident that delaying a purchase could mean facing higher costs in the future.
Considering these factors, here are the benefits of buying property now:
- Market Conditions: Muted price growth over the last few years offers a unique advantage for buyers, with prices at a historic low, mirroring those seen two to three years ago, price growth over the last few years.
- Less Competition: In today's buyer’s market, fewer buyers and more available properties mean less competition.
- Negotiation Power: The willingness of motivated sellers to negotiate asking prices presents an ideal opportunity to buy low and sell high. It’s also worth noting that properties priced within the competitive sub-R1.5 million range often sell for near or at the asking price due to higher buyer activity.
- Attractive Mortgage Terms: Exceptionally favourable mortgage lending conditions, with the lowest deposit requirements seen in over a decade, make this an ideal time to secure a loan.
- Investment Growth: Early property investment allows buyers to benefit from the wealth accumulation factor, particularly during market upturns.
Submitting an Offer: Top Tips
The process of submitting an offer on a property can be both an exciting and daunting experience for first-time buyers. Here's a streamlined approach to making your offer stand out:
- Understand Your Budget: Begin with a clear understanding of your financial limits by obtaining a mortgage pre-approval. Samuel Seeff advises buyers to secure a formal mortgage loan pre-approval, as this step ensures clarity on purchasing capacity and suggests having additional cash funds for a stronger position.
- Identify Your Ideal Property: Once you've found a property that meets your criteria, consider how you can make your offer more appealing. Cash deals for property or offers without conditional clauses often attract sellers since they promise a smoother transaction.
- Market Research: Before making an offer, research comparable properties in the area. This insight helps in crafting a realistic offer that aligns with market standards, potentially giving you a negotiation edge.
Deciding to offer more than the asking price depends on the property's value to you and the competitive landscape. Prime locations and accurately priced properties might necessitate such offers to secure the purchase. - Offer Strategically: The risk of offering too low might result in missing out on the property to a higher bidder. Conversely, sellers risk losing potential buyers with unrealistic pricing. In some cases, an offer of 5% to 10% below the asking price could be considered, especially if it's a cash deal or if the seller is motivated to sell quickly.
For high-end properties (R10 million to R20 million), sellers might be more open to significant discounts if they're under pressure to sell or if the property is overpriced and lingering on the market. - Avoid Overpaying: Falling in love with a property can cloud judgment. It’s vital to remain objective and ensure the offer reflects the property's fair market value, safeguarding against overpayment.
The current climate offers an exceptional window for first-time home buyers. If you're poised and prepared to embark on this journey, there's no reason to delay.
Contact Seeff for expert guidance and support as you ask that crucial question: is it a good time to buy a house?
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